Module 1: Professional Responsibilities Practice Flashcards

Flashcards covering professional responsibilities, attest functions, quality control, Sarbanes-Oxley, PCAOB, and international ethical standards.

According to generally accepted auditing standards, how are policies and procedures defined for a CPA firm?

They are designed to provide reasonable assurance that the CPA firm and its personnel comply with professional standards.

What is a conceptual difference between the attestation standards and generally accepted auditing standards (GAAS)?

The attestation standards do not apply to audits of historical financial statements, while generally accepted auditing standards do.

Which attribute is most likely to be unique to the audit work of CPAs compared to other professions?

Independence.

How is the Public Company Accounting Oversight Board's standard of 'due care' ordinarily interpreted?

It requires a critical review of the judgment exercised at every level of supervision.

Under what conditions can a member of the AICPA receive an automatic expulsion?

If the member is convicted of a crime punishable by imprisonment for more than $1$ year, files their own fraudulent tax return, or files a fraudulent tax return for a client knowing it is fraudulent.

What is an example of a 'self review' threat to member independence?

An engagement team member prepares invoices for the attest client.

Which specific employment circumstance prevents a CPA from being independent when performing audit engagements?

Employment of the CPA's spouse as a client's director of internal audit.

According to ethical standards, what act regarding client records is generally prohibited after an engagement is terminated?

Retaining client records after the client has demanded their return.

Under what circumstance may a CPA hire a non-CPA systems analyst for their public accounting firm?

Provided the CPA is able to supervise the specialist and evaluate the specialist's end product.

If an auditor has a difference of opinion with the assistant about audit results, what should the firm's procedures enable the assistant to do?

Document that member's disagreement with the conclusions reached after appropriate consultation.

On what factors does the nature and extent of a CPA firm's quality control policies and procedures depend?

The CPA firm's size, the nature of the CPA firm's practice, and cost-benefit considerations.

To which services does quality control for a CPA firm apply according to Statements on Quality Control Standards?

Auditing and accounting and review services.

According to PCAOB guidance, what must an auditor do when a standard uses the term 'should'?

The auditor must comply with requirements unless s/he demonstrates that alternative actions were sufficient to achieve the objectives of the standard.

Under the Sarbanes-Oxley Act, for how many years must most audit working papers be saved?

$7$ years.

Which board was established as a result of the passage of the Sarbanes-Oxley Act?

Public Company Accounting Oversight Board (PCAOB).

Under Title II of the Sarbanes-Oxley Act, which type of service is an auditor of an issuer legally prohibited from performing for that issuer?

Internal audit outsourcing services.

What is the rotation limit for an audit partner in charge of an audit of a public company?

The partner may perform that role for $5$ consecutive years.

What is the membership composition requirement for CPAs on the Public Company Accounting Oversight Board?

Only $2$ of its members may be CPAs.

Which standards is the Public Company Accounting Oversight Board (PCAOB) NOT responsible for?

Accounting standards.

Regarding PCAOB inspections, which portion of the report is not ordinarily publicly available?

The portion of the report issued on a CPA firm's quality control.

How does the IFAC Code of Ethics for Professional Accountants compare to the AICPA Code of Professional Conduct regarding prohibitions?

The IFAC Code has fewer outright prohibitions.

According to the IFAC Code of Ethics, what action should an audit firm take if it discovers threats to independence?

Evaluate the significance of the threats and apply appropriate safeguards to reduce them to an acceptable level.

Which body is responsible for establishing international auditing standards?

The International Federation of Accountants.

What are the three types of independence impairments described by the GAO for government auditing?

Personal, Organizational, and External.

Which body enforces the audit requirements of the Employee Retirement Income Security Act of $1974$ (ERISA)?

The Department of Labor.

To which entities does the requirement for independence apply regarding audits of employee benefit plans?

The plan and the plan sponsor.